Key takeaway

A warranty in a share purchase agreement will not automatically amount to a representation. However, Hoffman v Finalto confirms that transaction documents, signing protocols, non-reliance wording and disclosure letters can, in the right context, support an argument that warranty statements also operated as representations. For buyers, sellers and advisers, the case is a reminder that the drafting and sequencing of transaction documents matters.

Why does the warranty and representation distinction matter?

A recent Commercial Court decision, Hoffman v Finalto Group Ltd [2026] EWHC 921 (Comm), revisits one of the more persistent tensions in transactional law: when, if ever, can a warranty given in a share purchase agreement also amount to a representation? The deceit claim at the heart of the case ultimately failed on the facts, but what the court said along the way is worth the attention of anyone involved in buying or selling a business.

What is the difference between a warranty and a representation?

A warranty is a contractual promise: if it turns out to be untrue, the buyer has a claim for breach of contract. A representation is a statement of fact made to induce a party to enter into a contract: if false, it can give rise to a misrepresentation claim and, where fraud is involved, a claim in deceit.

The practical difference is significant. Misrepresentation claims, particularly deceit claims, can open up remedies and heads of loss that breach of warranty claims do not. That is why buyers, and their lawyers, are often keen to establish that warranty statements also operated as representations.

The court adopted the analysis set out in Fraud and Breach of Warranty (2nd ed): a warranty does not, without more, imply any representation. A vendor might properly agree to compensate a purchaser if a matter turns out differently, without ever representing that it will not. A warranty cannot itself be a representation because it is not pre-contractual, it is given at the moment of contracting. The real question in these cases is whether there is some other context, statement, or conduct that transforms the promise to warrant into a representation that the subject matter of the warranty is actually true.

For related analysis, read our article on disclosures as representations and misrepresentation claims in disclosure letters.

Why did the court find that the warranties were also representations?

The warranties here were given in a Management Warranty Deed, a document entered into alongside the share purchase agreement and other transaction documents. Under an agreed signing protocol, the Management Warranty Deed and the Disclosure Letter were signed before the SPA itself.

The court found that the statements in the Management Warranty Deed did take effect as representations as well as warranties. Four factors drove that conclusion.

First, the nature of the statements. Many described past or present facts, matters that would be unlikely to be within the knowledge of the buyer. That is information being conveyed, which sits in the territory of representation rather than contractual promise.

Second, the sequence of events. Drafts of the Management Warranty Deed and Disclosure Letter were circulated and seen before the parties entered into the final documentation. Under the signing protocol, these documents were executed before the SPA. Statements circulated and made before contracting are the classic domain of pre-contractual representation.

Third, the drafting of the Management Warranty Deed itself. One clause confirmed that no party had entered into the transaction on the basis of any representation not expressly incorporated into the Deed or the other transaction documents, language which assumes that representations may be incorporated. Another clause excluded liability for negligent and innocent misrepresentation made prior to and/or in the Deed, but did not exclude fraudulent misrepresentation, a point confirmed elsewhere in the same document. That drafting, the court found, contemplated the existence of representations within the Deed.

Fourth, the Disclosure Letter stated that the Management Warrantors made no representation in relation to any disclosed matter not expressly given in the Warranty Deed. That too, the court read as acknowledging the possibility of representations within the Deed.

Why did the deceit claim fail?

Despite all of this, the deceit claim failed. The relevant representations were not shown to be false, were not shown to have been disbelieved by the claimants and did not affect the decision to proceed with the transaction. But the finding on representations, and the route to it, is where the lasting significance of this case lies.

Our litigation team considered similar issues in our recent article on deceit claims in share sale disputes, including why representation, falsity, dishonesty and reliance must each be proved carefully against the full transaction record.

Why does Hoffman have wider implications for M&A transactions?

The court was careful to say that the analysis is always fact-specific. The mere willingness of a vendor to give warranties does not transform them into representations, but here is the difficulty: most of the factors that led the court to its conclusion are not unusual features of this particular deal. They appear in many share purchase agreements.

Draft transaction documents, including warranty schedules and disclosure letters, are routinely circulated before signing. Non-reliance clauses that exclude negligent but not fraudulent misrepresentation because no one will agree to exclude fraud, are standard. Disclosure letters that frame their scope by reference to the warranty deed, and in doing so implicitly acknowledge the possibility of representations within it, are common. Warranties describing historical facts about the target business that the buyer cannot independently verify are entirely ordinary.

The author of the original commentary on this case put it plainly: aside perhaps from the separate Management Warranty Deed signed in advance of the SPA, the features identified by the court appear in most transactions. This case may therefore give fresh encouragement to misrepresentation claims and particularly deceit claims founded on matters set out in warranty schedules and disclosure letters.

Read our Corporate team’s guide on how to prepare a UK SME business for sale for more on how legal, financial and disclosure preparation can affect value preservation and buyer scrutiny before completion.

What does this mean for buyers and sellers?

For those on the sell side, Hoffman v Finalto is a prompt to look carefully at how exclusion and non-reliance clauses are drafted, and whether they do the job they are intended to do. For those on the buy side, it confirms that warranty statements are not necessarily confined to the contractual box in which they are placed. And for anyone involved in a dispute where the accuracy of pre-signing information is in issue, the analysis in this case repays careful reading.

Barnes Law’s Corporate team advises buyers, sellers, investors and management teams on M&A transactions, warranty protection, disclosure processes and transaction risk. For more information, please contact our Corporate team to discuss how we can support you.

Written by Barnes Law Managing Partner Yulia Barnes.